Hearing Panel of the Central Regional Council:
- Emily Cole, Chair
- Linda J. Anderson, Industry Representative
Michael Mantle, Enforcement Counsel for the Mutual Fund Dealers Association of Canada
Ashley Thomassen, Counsel for Respondent
Robert Earl Ledingham, Respondent
- This was a hearing pursuant to section 24.4 of By-Law No.1 of the Mutual Fund Dealers Association of Canada (“MFDA”) to consider a settlement agreement dated November 10, 2021 (“Settlement Agreement”) between staff of the MFDA (“Staff”) and Robert Earl Ledingham (the “Respondent”).
- After reviewing the Settlement Agreement and the material filed by Staff and hearing submissions from counsel for Staff and counsel for the Respondent, the Hearing Panel accepted the Settlement Agreement attached as Schedule “1”, and signed an order reflecting our These are the reasons for our decision.
- Based on the Agreed Facts set out below the Respondent admits that:
- between July 28, 2014, and January 15, 2019, the Respondent photocopied signature pages from account forms that had been signed by clients and re-used the signature pages to complete eight additional forms in respect of three clients, contrary to MFDA Rule 2.1.1;
- between April 26, 2012, and January 15, 2019, the Respondent altered and used to process transactions 57 account forms in respect of 37 clients by altering information on the account forms without having the client initial the alterations, contrary to MFDA Rule 2.1.1; and
- between May 9, 2012, and March 11, 2019, the Respondent obtained, possessed, and in some instances used to process transactions, 67 pre-signed account forms in respect of 43 clients, contrary to MFDA Rule 2.1.1.
III. PROPOSED SANCTIONS
- Staff and the Respondent agree and consent to the following proposed sanctions:
- the Respondent shall be suspended for a period of one month from conducting securities related business in any capacity while in the employ of or associated with a Member of the MFDA commencing upon the date the Settlement Agreement is accepted by the Hearing Panel, pursuant to s. 24.1.1(c) of By-law No.1;
- the Respondent shall pay a fine in the amount of $21,000 in certified funds upon acceptance of the Settlement Agreement, pursuant to s. 24.1.1(b) of MFDA By-law No. 1;
- the Respondent shall pay costs in the amount of $2,500 in certified funds upon acceptance of the Settlement Agreement, pursuant to s. 24.2 of MFDA By-law No. 1; and
- the Respondent shall in the future comply with MFDA Rule 2.1.1.
IV. AGREED FACTS
- Since June 1999, the Respondent has been registered in Ontario as a Dealing Representative with Sun Life Financial Investment Services (Canada) Inc. (the “Member”), a Member of the MFDA.
- At all material times, the Respondent conducted business in the Welland, Ontario area.
- The Agreed Facts are set out in detail in paragraphs 7 to 29 of the Settlement Agreement. Briefly, the Respondent photocopied and reused three client signatures pages to complete eight additional forms. He also altered information on 57 account forms without having 37 clients initial the alterations and then used those forms to process transactions. In addition, the Respondent obtained, possessed and, in some instances, used to process, 67 pre-signed account forms in respect 43 clients.
- Further Agreed Facts will be discussed in our analysis below.
Jurisdiction of the Hearing Panel
- A Hearing Panel is authorized to either accept or reject a settlement agreement.
- Section 24.4.3 of MFDA By-law No. 1
- The role of a Hearing Panel in reviewing a settlement agreement is to determine whether the proposed penalties agreed to by Staff and the Respondent fall within a reasonable range of appropriateness – not to determine what is, in its view, the correct penalty. A Hearing Panel “will tend not to alter a penalty that it considers to be within a reasonable range, taking into account the settlement process and the fact that the parties have agreed. It will not reject a settlement unless it views the penalty as clearly falling outside a reasonable range of appropriateness.”
- Mílewski (Re),  I.D.A.C.D. No. 17
- Sterling Mutuals Inc. (Re), 2008 LNCMFDA 16 at para 37
- Settlements are to be encouraged. They make a significant contribution to meeting the MFDA’s primary objective of investor protection by providing a practical and efficient way of addressing misconduct in the securities industry. Where the Respondent takes responsibility and admits his misconduct and the parties can agree upon appropriate sanctions, settlements can save time and conserve the regulator’s limited resources. Settlements also provide certainty and are likely to result in greater compliance with the sanctions imposed.
- British Columbia (Securities Commission v. Seifert,  B.C.J. No 225 at paras. 48-49 (S.C.), aff’d  B.C.J. No 2186 at para. 31 (C.A.)
The Seriousness of the Misconduct
- The Respondent’s misconduct is serious because of the nature of the misconduct, the lengthy period the Respondent engaged in the misconduct and the type of forms involved.
- The Respondent admitted to three contraventions involving reusing client signatures, altering account forms and pre-signing account forms. While there was no client harm, photocopying and reusing signature pages, altering account forms without the client initialing them and pre-signing forms are all a form of forgery.
- The Hearing Panel is concerned that the Respondent engaged in this misconduct for seven years. We inferred that this was simply the way the Respondent conducted business. In our view, the way the Respondent conducted business is a callous disregard of MFDA Rules. The Respondent’s misconduct was also contrary to his Dealer’s policies and procedures.
- The Respondent’s practice of photocopying and reusing signature pages, altering account forms without the client initialing them and pre-signing forms adversely affects the integrity and reliability of account documents, destroys the audit trail, and prevents the Member from effectively supervising its Dealing Representatives and protecting clients and has the potential for misuse in the form of unauthorized trading, fraud, and misappropriation and as such are a serious breach of the standard of conduct expected of a Member under Rule 1.1.
- Barnai (Re),  Hearing Panel of the Central Regional Council, MFDA File No 201325, Panel Decision dated March 17, 2015, at paras 6-8
- Some of the forms that the Respondent forged were of particular concern to the Hearing Panel including Know Your Client Update forms (“KYC Update forms”).
- The Respondent photocopied and reused signature pages on three KYC Update forms. He also altered information on 16 KYC Update forms and pre-signed 18 KYC Update forms.
- KYC forms are an essential tool to protect investors by ensuring any advice they receive or products they invest in are suitable for them. Updating KYCs with clients to reflect any changes in their circumstances that could impact their financial goals and risk tolerance is as important as completing the original KYC.
- The Hearing Panel was also concerned that the Respondent altered five and pre-signed eight limited trade authorization (“LTA”) forms.
- The purpose of an LTA is to facilitate a trade without written instructions from a client. Normally, a Dealing Representative is required to obtain a client’s signature on trade instructions before a mutual fund company can complete a transaction. By signing an LTA, a client authorizes a Member to execute a trade without his or her signed written instructions to the mutual fund company. LTA’s permit Dealing Representatives to obtain oral instructions from a client in person or by telephone before placing a trade. Dealing Representatives must take specific notes as set out in MFDA MSN-0035 Recording and Maintaining Evidence of Client Trading Instructions.
- MFDA Staff Notice MSN-0042, June 16, 2005
- It is critical that Dealing Representatives discuss and complete these forms with their clients to ensure the LTA accurately reflects the client’s authorization. By altering and pre-signing LTA forms, the Respondent compromised the integrity of those forms.
- The Hearing Panel also considered the aggravating factor that the Respondent’s misconduct continued for several years post MFDA Bulletins warning against it.
- MFDA Staff Bulletin 0661-E, October 6, 2015
- The Hearing Panel considered the following mitigating factors:
- There is no evidence of client loss, client complaints, or lack of authorization.
- There is no evidence that the Respondent received any financial benefit from the conduct set out above beyond the commissions or fees he would ordinarily be entitled to receive had the transactions been conducted in the proper manner.
- The Respondent paid the Member $8,400 for costs related to the Member’s close supervision and enhanced supervision of the Respondent.
- The Respondent has not previously been the subject of MFDA disciplinary proceedings.
- By entering into this Settlement Agreement, the Respondent has saved the MFDA the time, resources, and expenses associated with conducting a full hearing on the allegations.
- The costs award is appropriate and consistent with previous MFDA decisions.
- We are satisfied that the proposed sanctions, including the one-month suspension of the Respondent’s authority to conduct securities related business in any capacity while in the employ of or associated with a Member of the MFDA, the $21,000 fine and $2,500 costs will serve as specific deterrence to the Respondent, Robert Ledingham, and general deterrence to others in the industry who may contemplate engaging in similar misconduct in the future.
- Staff provided seven MFDA decisions which addressed similar misconduct including Hare (Re),  Hearing Panel of the Central Regional Council, MFDA File 202141, Panel Decision dated September 17, 2021, Owen (Re),  Hearing Panel of the Prairie Regional Council, MFDA File No. 201784, Panel Decision dated December 7, 2017, Williams (Re),  Hearing Panel of the Prairie Regional Council, MFDA File No. 201864, Panel Decision dated August 30, 2018.
- Based on a review of these cases and taking into consideration the factors discussed above, we are satisfied the proposed sanctions fall within a reasonable range of appropriateness.
- We therefore accepted the Settlement Agreement and made an order reflecting the agreed upon sanctions against the Respondent, Robert Ledingham.
Emily ColeEmily ColeChair
Linda J. AndersonLinda J. AndersonIndustry Representative